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Archive for the ‘HMRC’ Category

The 2011/12 season has been characterised by long-running sagas. Normally I find myself in an annual review recounting a series of relatively self-contained accounts of the woes which have beset a number of clubs, but many of those listed below are far from resolved scenarios.

The selection is not systematic – it consists of the clubs who have found themselves on my radar screen; further suggestions are welcomed.

Ashford TownFor a club to have its two co-owners feuding (1) was always likely to lead to tears before bed-time. Add to this a withdrawal from its league in 2010 (2) and there is a clear downward pattern. This July HMRC issued a winding-up petition (3).

Billingham TownA long dispute with Hartlepool over who should pay for improvements to the Billingham stadium (4) had been resolved in December 2010, but in January this year Billingham sought to wind themselves up (5). However, HMRC then stepped in with their own winding-up petition (6). The former of the these two seems to have been granted in April (7), but nonetheless the club is still is playing. Any insight into what has happened would be much appreciated.

Coventry CityCoventry City have faced financial problems since their relegation from the Premier League in 2001, not least because of the development of the Ricoh Arena, a less ambitious materialisation of what had originally been called Arena 2000, originally designed with a retractable roof and a removable pitch (8). In 2007, in a moment of financial crisis with the club having announced its intention to go into Administration, it was bought by venture capitalists SISU. Since then SISU has failed to inject enough money to buy back the Rich from the local council and a local charity.
SISU have struggled to find the right balance between economising and maintaining team performance, thus causing complaints from fans. The financial struggle led to SISU stopping paying the rent for the stadium in April this year in an attempt to force a lower a rental. The confrontation was resolved in court last month, but details have not been made public (9).

Croydon AthleticThe imprisonment of owner Mazher Majeed for his part in cricket’s ‘spot-fixing scandal’ last November (10) made the club unsustainable. It was promptly fined and deducted 10 points (11), adding another straw to an already broken back. Unable to find a new owner, the club withdrew from the Isthmian League, unable to fulfil its fixtures (12). A resurrection club, AFC Croydon Athletic, has been formed however (13).

DarlingtonA sorry tale of desperation and despair, covered in postings passim and on the TwoHundredPerCent website, but eventually one of hope. In early May fans group Darlington 1883 finally succeeded in taking over the club (14), but at what a price – the club had been forced into exile (15 and 16), and demoted to the Northern League Division 1 (17). Onwards and upwards!

Harlow TownAnother sorry tale, this time tied up with the owners’ divorce (18 and 19; note the dates). The club entered a CVA back in September 2009 (20). Last November the club faced a winding-up order from HMRC (21), but this was finally dismissed in February. In the same month, new owners had taken over (22). Any further insight from local readers would be appreciated.

Kettering TownNot the ultimate car crash – that comes lower down the posting – but certainly one of the most dragged cases. See postings passim and on the TwoHundredPerCent website. The season just finished was yet another traumatic one.
Having started the season by going into exile at the former Rushden & Diamonds stadium in Irthlingborough, less than ten miles away, there seems to have been no synergy in attracting new fans, as is reflected in the appearance of fan-owned AFC Rushden & Diamonds, also in exile, at Wellingborough, ground-sharing with Wellingborough Town, less than five miles from Irthlingborough.
Debts built up, and in June the club had to enter a CVA, with debts reported to be £1.2m (23), and HMRC hot on the club’s heels (24).Meanwhile, want-away owner Imran Ladak had handed over the reins to ‘acting Chairman’ George Rolls, at least, until he was suspended from football for five years by the FA (25). Ritchie Jeunne took over as Chairman (26), albeit extremely briefly, and now, in a Chainraiesque twist, Ladak is back (27). The long-suffering Poppies Trust continue to fight on doggedly (28) notwithstanding demotion and a 10 points penalty (29).

NeathChased over debts by HMRC and then Barclays (30), the Welsh Premier League club was wound up at the end of May (31).

Northwich VictoriaAnother depressing season for the clubs’ fans – evicted from their stadium (32), and then a crazy saga about where they could and couldn’t play (33), and expulsion from the Northern Premier League (34). You couldn’t make it up.

Plymouth ArgyleIt seems some time ago now, but the final chapter in the club’s survival was last October, and so within last season. Mark Murphy has a neat summary of events here.

Port ValeYet another long-running saga – see postings passimandTwoHundredPerCentfor details. Notable events and non-events during the 2011/12 season were the appointment of an Administrator in March (35), the lack of an attempt to take over by long-time suitor Mo Chaudry (36) and the Administrator’s misplaced faith in Keith Ryder as a potential owner (37).

PortsmouthHere we go yet again. The ‘club as company’ has been, more or less continuously, the basket case of English football for the past four decades, and this last season has proved no exception, with the arrest of the latest owners in November (38) and a now familiar drop into Administration in February. I’m going to hold back in my lengthier comments for the moment as we seem to be on the point of either the start of a new chapter in the saga or dénouement.Suffice it to say, in the red corner is Balram Chainrai, threatening to ‘save the club again’. To me this is a bit like ‘giving up smoking’ – you can’t logically apply the phrase on more than one occasion. In the blue corner is the Pompey Supporters Trust (vested interest declared – I have made a pledge to buy shares, and would urge all Pompey fans to do likewise here)

Prescot CablesIn an act all too rare in English football, the supporter-owned club took the difficult but realistic decision to return to amateur status (39).

Rossendale UnitedEffectively defunct at the end of the previous season, the club still appeared on my radar screen. In March the club was still being chased for £37,000 by HMRC (40). In January the defunct stadium had been gutted by fire (41), and the next month the owner, Andrew Connolly, had announced plans to redevelop the site with 50 new houses (42). This forced the abandonment of plans for a resurrection club (43)

Rothwell TownWhich is, by the way, five miles from Kettering and thirteen from Irthlingborough. In May 2010 the club had withdrawn from the Southern League due to financial difficulties (44), and a mooted rescue did not materialise (45). Last October the club went into Administration (46), and in March the ground was put up for sale (47). As far as I can make out, there have been no further substantive developments – again any local input would be appreciated.

Stockport CountyYet another season of uncertainty for County (see postings passimandTwoHundredPerCent). The end of a ground-sharing agreement for Edgeley Park with Sale Sharks will have added to the financial pressures (48).

Truro CityAn interesting case of amazing success on the pitch, driven by a ‘benefactor’, which has proved unsustainable (49). The club has been pursued by HMRC (50), struggled to play its players (51), and at the start of the current season has had to seek protection through Administration (52). Two mysteries remain – the involvement of the Salisbury City Chairman, William Harrison-Allison (53), and the sale of the ground (54). The timing of the latter will guarantee that this story has legs.

WidnesThe joker in this particular pack, destined to be an obscure name that only reappears occasionally in pub quizzes. It marks an attempt by Steven Vaughan, he of Barrow, Chester and at one time allegedly Wrexham fame (see postings passim), through his son, to create a football club from scratch. Originally to be called Widnes Town (55), it had to change its name on the not unreasonable grounds that Widens Town already existed (56). Finding a ground to pay at proved challenging (57) and Stephen Vaughan seems to have opted to weave his own very particular brand of football magic in Malta instead (58).

Very roughly, the clubs involved fall into two groups. First here are the League clubs. Here there seems to be a continuing trend of slightly fewer clubs getting into financial difficulty, but those that do do so on a grand scale, and perhaps do so on a kind of cyclical basis – one crisis leads directly to the next one.

The second group, the non-League clubs, frequently display Benefactor Withdrawal Syndrome (BWS). The unsustainability of this business model becomes particularly problematic when the ‘benefactor’ has lifted the club up the pyramid to a level where his withdrawal makes survival especially difficult. Clubs like Crawley Town and Fleetwood are surely vulnerable to BWS, not to mention the League and Premier League clubs of much longer standing who have become benefactor-dependent.

When I started preparing this posting, I did so with as close to a sense of cautious optimism as I manage. With the natural exception of Portsmouth, surely things were beginning to look a little rosier in the football football finance garden. Having completed it, I’ve fallen back to more usual mood of pessimism, wondering when club owners are going to get a grip and face reality (full marks to Prescot Cables as an exception). Not that aren’t some good practice stories out there – Wrexham and Chester provide the most encouraging examples.

At least fifteen years ago I wondered ‘when the bubble was going to burst’. This has obviously proved the wrong metaphor. Suggestions for a more appropriate one are welcomed.

There can be no doubt that the abbreviation HMRC is one which has hit pretty well every football fan’s radar screen recently. There have been the two big Administrations at Portsmouth and Rangers. Bubbling away in the background is not only the issue of whether clubs’ use of Employment Benefit Trusts constitutes tax evasion (and is hence illegal) or merely tax avoidance (perfectly legal), but also HMRC’s challenge to the legality of the Football Creditors Rule, which has seen it take substantial hits in its revenues since the Crown lost its ‘preferential creditor’ status in 2003, which resulted in ‘football creditors’ coming higher in the ‘pecking order’ when things went pear-shaped. At present clubs in Administration face an obstructive HMRC when seeking to enter a CVA which would see HMRC being paid anything less than 100p in the pound.

Has the general approach of HMRC to football clubs changed over time? It states its position pretty consistently, as it did thus with respect to Rangers: “We can’t discuss specific cases for legal reasons, but tax that has been deducted at source from the wages of players and support staff, such as ground keepers and physios, must be paid over to HMRC. Any business that fails to meet that basic legal requirement puts the survival of the business at risk.”

So, just what is HMRC’s track record over time in pursuing football clubs? I’ve been researching its propensity to ‘present a winding-up petition’ against a football club, and how it’s changed in terms of frequency over the period since 1960. Some of the outcomes are unsurprising, but others may be a little surprising.

The full data set is available here, and I will endeavour to keep this list up-to-date. It covers all English and Welsh clubs, but not Scottish clubs, and has been developed by searching the London Gazette database.

Here are some thoughts on what I found:

HMRC and its predecessors (the Inland Revenue, who were responsible for collecting direct taxes such as income tax [including PAYE] and National Insurance contributions, and HM Customs & Excise, who were responsible for collecting indirect taxes, notably VAT, merged to form HMRC in April 2005) seem to have shown little favour towards League clubs, and even less to non-league clubs.
In total since 1960, they have presented a total of 181 winding-up petitions, against League clubs on 58 occasions, and against non-league clubs on 123 occasions.

The frequency has varied considerably. There were only two petitions presented in the 1960s, whereas in the peak decade to date, the 1990s, 62 were presented.
(Images can be enlarged by clicking on them)

A year-by-year plot of petitions since 1990 reveal a more nuanced pattern. After a burst of activity in 2002, HMRC seem to have eased off presenting petitions until taking up the challenge again seriously in 2009, with a greater proportion of League clubs being the object of HMRC’s interest.

My impression from the list of clubs involved is that there is something of a North/South divide, with a disproportionate number of Southern clubs in the list

HMRC has complained of ‘serial offenders’ and there is some evidence of this. Bournemouth were on the receiving end of 5 petitions between 1995 and 1997; Chester City received 6 between 1986 and 2009; Crawley Town received 6 between 1973 and 2010; Doncaster Rovers received 4 between 1988 and 1994; Hartlepool United received 7 between 1982 and 1993; Hull City received 6 between 1992 and 2000; Margate received 4 between 2001 and 2010; Northwich Victoria received 4 between 1983 and 2008; Southend United received 4 between 2000 and 2011; and Stockport County received 4 between 1975 and 1999.

Looking at just the list of Winding-Up petitions of course tells only part of the story. The size of the debt to the Tax Man has grown astronomically. When Accrington Stanley withdrew from the Football League in 1962, the club owed the Tax Man roughly £4,500; Portsmouth owed HMRC approximately £11 million when they sought the protection of Administration in 2010. The interesting question is why did HMRC hold back in the period up to 2009 and allow such large debts to grow. It’s not as if they have a track record in the longer term of being tolerant with football clubs.

One petition in the list intrigues me, and I would appreciate any input from readers who know of the circumstances: in 1993 Customs & Excise presented a petition against Gorton and District Sunday League Football Club, and the club was indeed wound up as a result.

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At last, Part 2 of my overview of what is happening from a broad financial perspective. Part 1 ran alphabetically up to Prescot Cables, and is available here. With a slight jump backwards, we pick it up with:

Port ValeAn interesting case of ‘fan ownership’. Valiant 2001 bought the club from the Administrators in 2003 (1) – the club had debts of £2.4m and was said to be losing £500,000 a year (2) – and in doing so avoided the real threat that football might have disappeared from Vale Park (3).
Survival has been a battle, with the problem of sponsors not paying and a threatened takeover (4), and the need for a loan from Stoke City Council (5). Nevertheless the club managed to complete its CVA in May 2005 and to come out of Administration in October 2006. Meanwhile local boy Robbie Williams had bought shares for an undisclosed sum (6). However Chairman Bill Bratt had “taken the club as far as I can” by September 2008 (7), but was denying takeover rumours the following month (8).
Into the New Year and a row was brewing over the apparently different involvement with local rivals Stoke City by the council (9). Bratt attempted to clarify the club’s difficulties here, and pointed out his already considerable commitment to the club (10).
Fan opposition to the way the board was running the club mounted, and Bratt pointed out the obvious:

Supporters have protested against the board in recent weeks, and Bratt said it could be potentially destructive. “If we go, what happens? We fold immediately. If that’s what they want, they could take the club down, not the board,” said Bratt. He added: “I’m quite happy to walk away from this club right now, but the banks and creditors would come in straight away, and there’s no Plan B in place.(11)

Plans B, C and D have however emerged in recent years – the failed attempts by various parties to invest in the club (Harlequin Properties (12); Mike Newton (13); Mo Chaudry (14); and most recently Blue Sky International (15)), although there has been investment by Peter Miller (16).
All the uncertainty has prompted an attempt by fans to oust the board (17).
All very sad. The days of fan-benefactors like Jack Hayward, Jack Walker and Steve Gibson seem to have gone, and fans need to be clear in discriminating between ‘fan-owned’ and ‘Supporters Trust owned’.

PortsmouthI’d planned to avoid blogging about Pompey until the situation became clearer, but it hardly seems reasonable not to comment in this context.
The immediate situation sounds reasonable, with the immediate possibility of points deduction probably not on the Football League’s agenda (see previous posting). The issue is just how long the ‘immediate’ will last – current indications are that it will all too brief, with time and money running out sometime next month. Whether Keith Harris will have been able to weave his magic in finding a buyer before then (18) seems unlikely – Pompey are hardly the most attractive of clubs to buy in their present mess (19). I have it on good authority that even the liquidation of the ‘oldco’ is proving to be contentious.
Administration for the club (as opposed to the existing Administration of CSI) looks increasingly likely, with its inevitable 10 points deduction, threat to keeping up the CVA payments (and further points deduction).
Increasingly liquidation and resurrection by the Pompey Supporters Trust looks the only viable longer-term scenario.

Rossendale United
The club did not reapply for membership of the North West Counties Football League at the start of this season (20), and a new club is being resurrected (21). News is scant, any local informed input would be appreciated. See also my posting in Marchwhere I argued that the club was a classic case of Benefactor Withdrawal Syndrome (BWS).

Rothwell Town
In October the Rowellian Football Social Club (trading as Rothwell Town Football Club) did go into Administration (22). Again, any local informed input would be appreciated.

Rushden & DiamondsFollowing their expulsion from the Conference (23), the club tried but failed to get into the Southern Premier League (24), and went into Administration (25). That appears to be the end of the club in this manifestation, but an AFC Rushden is being formed (26).
This seems to be another case BWS, although perhaps with twists yet to emerge…

Southend United
In November the club announced “Roots Hall Development Moves Closer” (27). So, nothing new there then. Meanwhile, the Fossetts Fantasy Farm project has been “has been removed from the [Council’s] capital programme until the certainty of developer contribution can be ascertained” (28).

Truro CityThe club owned by Kevin Heaney, wannabe owner of Plymouth Argyle, is in deep, deep trouble. Wages have been unpaid (29) and the ‘Stadium for Cornwall’ project now has a big question mark hanging over it (30).
HMRC are chasing tax debts of over £100.000, and the club has until January 16 to come up with the money or face a winding-up order (31).

WakefieldA not entirely unfamiliar story here too (32), with unpaid wages and money owed by a sponsor (33).

All too worryingly, I could start going round the alphabet again, with various tales of various woes at Barnet (34), Cheltenham (35), Chorley (36), Coventry (37), Croydon Athletic (38) and Dorchester Town (39), although at least the last of these has a positive side, a possible takeover by Dorchester Town Supporters Trust.

It looks as if the race is definitely on for the club to face the first insolvency event of 2012. February is the second highest peak for insolvency events (behind may), so it could well be a close run thing.

I’m beginning to wind down (or is it up?) for Christmas, so, in case I don’t post again in the next few days, a very Happy Christmas, or Bah Humbug (delete as you consider appropriate), to all readers.

There was some small crumb of comfort for Luton fans in the news that four of the directors of the previous owners of the club had been banned from being company directors (1) (and hence now fail the Fit and Proper Person Test). Former chairman Bill Tomlins was disqualified for six years; Derek Robert Peter, the former CEO and a chartered accountant was disqualified for seven years, and Richard Sidney Bagehot and John Mitchell were each disqualified for three years.

The official statement from the Insolvency Service (2) who investigated Luton Town, or more exactly the old company, Luton Town Football Club Limited (“LTFC”) – which is not in any way connected with present owners Luton 2020 – makes clear the scale of what had been going on under the club’s previous owners:

The investigation by The Insolvency Service found that the directors of LTFC had breached Football Association (FA) and FIFA rules and caused LFTC to trade at the risk and detriment of HM Revenue and Customs (“HMRC”), being in arrears with PAYE and NIC within a few months of commencing to trade and recently not declaring or paying its VAT liability.

Between July 2004 and February 2007 LTFC acted in breach of FA and FIFA rules and regulations on payments to football agents. The FA enquiry found that the company had dealt with unlicensed football agents and made payments totalling £157,000 through its holding company Jayten Stadium Limited (‘JSL’) using funds provided by LTFC which should have been paid by LTFC itself and routed through the FA.

During the same period of July 2004 and February 2007 the directors individually either caused or allowed the company to trade at the risk of and ultimate detriment to HMRC which was owed £3,578,661. The Court heard there was a pattern of non-payment and chasing from HMRC.

Why I say “small” crumb of comfort is for two reasons. First, the club has had to suffer as a football club for the misdemeanours of these previous owners (see previous posting where I wrote of Luton’s ‘unfair disadvantage’) in terms of points deductions and the resultant relegation to the Conference. Seeing four people just banned from being company directors hardly results in an overall balance of justice being seen to be done.

Secondly, the perceived lack of balance in justice is exacerbated by the fact that these goings-on came to light as a result of whistle blowing from within the club, which should have in part mitigated the punishments handed out to the club.

The success in bringing about these bans must give HMRC a good feeling for their ongoing fights with football clubs. These currently include the major fight North of the border against Rangers (a blog worth a look at on this is Rangers Tax Case as is The Scotsman), their attempt to have the Football Creditors Rule thrown out by challenging the leagues in court rather than taking action against individual clubs, and the ongoing cases against Harry Redknapp, Milan Mandric and Peter Storrie. Some interesting reading coming up there’s no doubt, and the various court rulings may have significant implications for all clubs.

As Plymouth Argyle fans come to terms with their club being in Administration, they can look along the South coast to Portsmouth to see that things can get better. On Thursday UHY Hacker Young, Pompey’s Administrators announced “the completion of the Club’s Company Voluntary Arrangement and exit from Administration on 24 February 2011. On 10 February 2011 an order was made by the Court confirming that on completion of the Administration the case would move to Compulsory Liquidation. Subsequently, the Secretary of State was appointed on 25 February 2011 with Geoffrey Carton-Kelly and David Hudson of Baker Tilly being appointed as Joint Liquidators on 28 February 2011.” (1) Portsmouth City Football Club Ltd. is dead – long live Portsmouth Football Club (2010) Ltd.! I hope not too many fans will feel a need to try and sort out tattoos – in fact, I wonder how many people even realised that the old company included the word ‘City’ in its name.

The Administrator’s Final Progress Report is downloadable here (as is the Completion of the Arrangement Report) – a welcome example of transparency. The Final Progress Report makes for interesting reading, and below I’ve set out some of the points it makes, in the order they occur in the report, with some thoughts of my own in italics:

Although Kevin‐Prince Boateng was sold to Genoa last August for €5,750,000, an installment payment plan was agreed. The first two of the four payments have been made, but the third, due on 15 January 2011 for €1,325,000, has yet to be paid in full. In fact, only £175,000 has so far been received. The fourth installment, for the same amount, is due on 15 July 2011, will go to the new company.Payments have been problematic from the beginning (2). Portsmouth, of course, don’t exactly have the moral highground when it comes to payments, but these are sums which the new company will be very much reliant on.

The sale of Tommy Smith to QPR will result in an extra £400,000 being paid if QPR are promoted to the Premier League.Which looks increasingly likely, so good news for Portsmouth.

Six players – Mahoto, Nlundulu, Subotic, Jordan Hughes, Papa Bouba Diop, and Hurst – agreed to cancel their contracts and thus reduce the club’s wages bill.
There is a lot of criticism of players for being greedy. Clearly this is not always the case.

“Breakfast and lunch was also provided for the first team and the Academy at the training ground. The total cost of food and drink purchases in the period was £41,494.13.”Interesting that in a climate of cost cutting, Pompey did not choose to follow the example considered by Chelsea of charging players training for their lunch (3), but Pompey players are no longer on Chelsea salaries.

“Police costs for the 2010/11 season were raised by the police due to the team being in the Championship and, as a result, playing more games.”While the rationale is clear, it does highlight in general a generally ignored discrepancy between the Premier League and the Championship – the number of league games played in the season. Sure, there are the games in Europe for some PL teams, but the players in the PL strugglers have a less demanding season than those in Championship clubs, for much higher wages. There’s something not quite right about this.

“A VAT surcharge of £23,224.63 was incurred for the late submission of the VAT return for the period ended 30 November 2010. I have withheld these monies (and they are currently being held in my client account) whilst I challenge the surcharge. If I am successful I advise these funds will be forwarded to PFC10.”My God! HMRC must just love Pompey…

Jobsite re-signed as club sponsors, but at a reduced rate because of the club’s relegation.Nevertheless, Andronikou reports that the new figure as “favourable when compared to other teams in the division”, some evidence for those who believe in the power of long-term sponsor relationships.

There have been a total of ninety staff redundancies.
On the one hand this was inevitable, but it is all too easy to forget the human cost to those involved.

The Academy has survived in spite of all the pressures.This has to be good news for the longer-term future of the club.

Sky TV was installed at a cost of £3,092.60 in the club’s offices, training grounds and hospitality suites.A minor amount, but isn’t it a tad ludicrous that Sky gets a revenue from clubs as well as from fans?

This is not new information (4), and to me is distinctly bad news. As soon as I see ‘British Virgin Islands company’ I break out in a cold sweat. Too many too recent memories of Falcondrone and Portpin… This lack of transparency is certainly not helpful and should be eradicated from English football ASAP.

Among the assets transferred to the new company, ‘Goodwill’ is listed at a value of £1.
A bit of an over-estimate some might think 😉

On the Sulley Muntari transfer saga:

As previously reported, following the sale of SM to Inter Milan (‘IM’) in 2008, £900,000 is now heavily overdue in respect of certain terms within the sale contract. IM had initially withheld these monies due to the fact that Udinese Calcio (‘Udinese’), a fellow Italian team, were due money by the Club. Udinese have now been paid those monies by the PL, however, Udinese believe that further monies are due. This matter is in dispute and is ongoing in the courts.It is not envisaged that IM will make payment until the matter with Udinese has been resolved. I advise that PFC10 are now continuing to pursue these monies and have full entitlement to any monies realised in this respect.

Just the sort of problem the new club would do without. Nothing to do with the fact that Inter have managed a cumulative loss of €509 million over the last three years then (5), impressive even by Pompey standards.

The ghost of Sascha Gaydamak continues to haunt the club. On the dispute between the club and him, Andronikou comments:

As you are aware after the initial six month period the [Barclays Bank] balance was frozen as a result of Alexander Gaydamak’s (‘AG’) claim for a subrogated right of security on these funds. At this time Barclays held funds totalling £498,129.54. I advise that in order to obtain a Deed of Release for these funds it was necessary to pay a ransom payment to AG of 50% of the monies held. I advise that a total of £249,064.77 was therefore paid to AG.

This bitter dispute has an additional implication for the club – it continues to pay Milland 2004, a Gaydamak company, for the use of the stadium car park. The fact that Gaydamak still ‘earns’ from the club he set on the way to its current situation when he sold it to Sulaiman Al Fahim (albeit it was a house of cards ripe for toppling) will not exactly endear him to the fans.

Non-preferential creditors (who are being paid 20p in the £) were owed a total of £65,155,211. This includes £17,135,173 owed to HMRC, a figure which is described as ‘being reviewed’.Is there still a twist to come in the battle with HMRC? I had thought the figure had finally been agreed following HMRC’s legal challenge.

Peter Storrie has been paid almost £110,000 as a consultant.Does he think he’s a banker on a bonus? Whatever the contractual agreement and the going rate may or may not be, it strikes me as quite wrong for him to be benefiting on such a scale from the club in Administration.

A confidential report on the conduct of PCFC’s directors has been submitted to the Insolvency Service, and the Liquidators of PCFC will be carrying out their own investigations.They may well prove to be more skeletons lurking the cupboard. Good that the past activities of the PCFC board will be subject to scrutiny. And of course there are the upcoming tax court cases – Storrie is due to appear in court in May, Redknapp in July.

The prospects of club as ‘company’ (see my 3Cs model)look good in terms of the organisation that the Administrator has shaped for the new owners. Who those owners are even in the mid-term are a cause for worry though. The prospects for club as ‘construct’ certainly look good look good, with Cotterill and the players seemingly on a roll. So, to any Plymouth Argyle fans reading this, there is life after Administration. They might also look closer to home – Bournemouth and, dare I say it, Exeter – for cause for hope.

But never let it be said that I am losing my touch as a miserable curmudgeon though. Notwithstanding that all charities have now been paid in full, the majority of unsecured creditors have lost 80% of the monies owed to them and this will leave a very bad taste for a very long time, as will the fact that the club is coming out of Administration and back into the hands of the owner who placed them there.

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The desperate rearguard fight by the Plymouth Argyle board to keep their control on trading has finally ended with the club going into Administration (1) and (2). They had already declared their ‘Intention to enter Administration’ (3), which attracted a 10 points deduction this season and the virtual certainty of relegation.

The reason they gave for ‘buying time’ was to see if they could find a buyer, a possibility that never seemed likely to this observer. As the period in which they could remain is ‘intending to enter Administration’ drew to a close, they were faced with a choice – enter Administration voluntarily, where they would have some say in who was appointed as Administrator, or wait for HMRC to press for a winding-up petition, which would have led to a less friendly, more creditor-oriented, Administrator. With HMRC pressing for a winding-up petition, not surprisingly they chose the former course.

This prolonging of the fans’ agony, by building up hope that a knight in shining amour was just waiting to be teased out of hiding by Peter Ridsdale, suggests to me that they had rather taken their eye of the ball , started to focus on red herrings, and altogether lost the plot (apologies for that horrendous mixing of metaphors). Questions will surely be asked as to why they had not sought court protection earlier. If pushed, they may even have to defend a charge of trading insolvently. This might be difficult to answer given that Argyle’s staff have not been paid for six weeks, and the club’s bank account had been frozen a week ago, this not being the first occasion that had happened of late (4).

Perhaps the oddest dimension of this tale of a last-minute fight against the odds is that three of the directors are accountants, a profession normally known for prudence rather than a lack of realism. They at least will be relieved that they had sold some of their shares to Japanese investors, so won’t have had all their personal funds at risk. The extent to which the Japanese have participated in this week’s decision-making remains unclear, as is their reaction to the news that the money they finally sent proved to be too little money too late (5).

As if things weren’t litigious enough, it was announced yesterday that the Charities Commission is to investigate a loan made to the club by The Plymouth Argyle Supporters Training and Development Trust, a body which exists to promote the training and education of young footballers (6).

What Brendan Guilfoyle, who has previously been the Administrator at Luton Town and Crystal Palace, finds as he goes through the Argyle books remains to be seen. The debt level, by received wisdom is some £3m, and possibly an injection of up to £10m is needed to restore the club to being a going business. At this stage Liquidation cannot be ruled out as a possibility.

While Guilfoyle may well see the selling of the club as a distinct challenge, he does have one intangible he can promote – the geographical location of the club and the potential to regrow the fanbase. He is also at least no longer encumbered with unrealistic plans for an enormous stadium (see postings passim).

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Watching the transfer window lurch to its conclusion has not been an edifying experience – I didn’t have high expectations mind you, and my thoughts were possibly coloured by the constantly breaking internet connection at the hotel in Central Europe where I am staying.

Certainly I was slightly surprised to read last Friday, from my position of intermittent ignorance, that Premier League spending had been “restrained” (1) according to Deloitte. This of course was before the surreal outbreak of activity which saw Torres transferred to Chelsea for some opaque figure, possibly with as high a valuation as £70m (2), and Carroll transferred to Liverpool for £35m (3). These transfers certainly helped to restore the inflationary trend of the past few years (4). While an argument can be made in defence of Liverpool’s position, it is not encouraging to find Alan Pardew ‘vowing’ (I hate the word, but am clearly out of line with most journalists) to spend all the money on new players (5). Much less encouraging was the report in The Times of India that the Torres transfer had been personally funded by Roman Abramovich (6), this at a club that is ‘strong’ despite losses of £70m (7).

Where does all this leave Financial Fair Play and an end to financial doping? Well, UEFA apparently seem unconcerned, stating that they have “full confidence that the clubs are increasingly aware of the nature of the financial fair play rules, which aim to encourage clubs to balance their incomes and expenses over a period of time covering 4-6 transfer windows” (8). I can’t honestly say that I share that level of confidence. It seems to me that some clubs are pushing spending to the limit and are making no attempt to keep the spirit of financial fair play.

The continuing lack of restraint the top of the pyramid simply continues to stretch the vertical integrity of the football pyramid. The guaranteed payments by the respective leagues show the increasing distortion. A Premier League club is guaranteed a payment of at least £41m, a Championship club receives just under £5m, and a League 1 club £1m. No wonder that ‘ambition’ pushes lower level clubs to unsustainable levels of expenditure. Breaking point has been reached in some cases and is nearby in others. A cull through my intermittent bookmarks of the last ten days highlights a few cases:

Clevedon TownThe club is facing a mass exodus of players because of their worrying financial situation (9), exacerbated by Jack Frost.

HistonThe club was recently visited by the bailiffs, although was apparently “all just a misunderstanding” (10).

Kidderminster HarriersAn on/off deal to save the club is, as I write, off, and players are unpaid (11).

Leyton FCThe club has been forced to withdraw from the Isthmian League Division 1 North mid-season (12).

Plymouth ArgyleThe club is now dependent on survival on funding finally turning up from its absentee Japanese investors (13). Under threat from HMRC and with other debts, the future of the club is by no means certain.

Welling UnitedThe club has faced allegations that players wages have not been paid on time (14).

Windsor and EtonA sad case this – the club was in no position to contest a winding up petition from HMRC (15) and is now no more (although there is talk already of a resurrection club). Whatever criticism may be levelled at the club’s directors, it is difficult to disagree with President Barry Davies’s assertion that “Not enough money in football these days filters down.“

It’s the minnows that are really suffering, and will continue to suffer until the highest level of football gets itself in order.

[Normal service should be resumed when I return to the comfort zone of my own wifi system in the early hours of Sunday morning. This posting is thanks to the University of Applied Sciences in Kufstein, Tirol, Austria.]

The car crash that Plymouth Argyle is on the verge of turning into is a strange case, yet many a club might well think that there but for the grace of god go they.

At the beginning of the nineties Dan McCauley had become Chairman, with his predecessor Peter Bloom becoming Vice Chairman. While the club did not have a particularly stable decade on the pitch (three relegations in eight years; seven managers), the club was run reasonably stably, if unsustainably, on a traditional benefactor model. Shortly before McCauley finally stood down in 2001, debts were reported to be £2.7m, with £1.8m owed to McCauley’s Rotolok Holdings. He was also advocating a new stadium, the capacity of which was wound in from 23,000 to 18,000, but with scope to increase capacity. As McCauley explained “An 18,000 all-seater stadium should be sufficient for us in the short-term. But it’s important to have flexibility in the design to cater for success when Plymouth Argyle move up through the leagues.” ‘Sufficient’ is an odd choice of word – average seasonal attendances throughout the decade had peaked at just over 9,000 in 1994, but had fallen to around the 5,300 mark. The sort of figure McCauley was speaking of had not been seen at Home Park on a regular basis since the fifties (1).

Reaching the age of 65 in 2001, McCauley found buyers he felt would be good for the club. The new board was led by local businessmen Paul Stapleton and Peter Jones, and included the local MP Michael Foot, and two London-based businessmen, Nick Warren and Phil Gill, all Pilgrim fans.

[Sources for the above paragraphs are newspapers, mainly the Western Daily Herald, and are unavailable on the internet]

Under the new regime, stadium redevelopment proceeded, but hit a snag when the Council declined to carry on funding it (2). Having already spent £2.6m, it felt that it was difficult to justify further expenditure. Argyle Vice Chairman Peter Jones rather ungraciously argued “People should not forget the council are the freeholder of the stadium. Given the fact that a revamped stadium will bring in more people, more income and more rent, they should be prepared to put in a proportion of the £5m we need.”

From a business perspective the early years of the noughties were a success. In 2004 they announced a profit for the third year running (3), and by 2005 the seasonal average attendance had reached almost 16,500, following a return to Tier 2 for the first time since 1992. The ground was purchased from the Council in December for £2.7m (4).

How then did things start to go wrong? The management of players proved problematic. with continuing changes in who was manager. The club managed to maintain their status in the Championship (until last summer, that is), but the fans started to drift away, attendances falling to just over the 10,000 mark on average.

In February 2008 the club recorded a record annual loss of £715,000 (5). Not only were revenues down, but the club had locked itself into some rather expensive player contracts. The wages/revenues ratio, which in 2001/02 had been at a very healthy 43.1%, had by 2007/08 risen to a rather unhealthy 74.4%.

In April 2008 the club announced a surprise new investor – Japan’s K&K Shonan Management Corporation, headed by Yasuaki Kagami who joined the Argyle board (6).

Argyle chairman Paul Stapleton, said: “We are excited about the future possible revenue streams from the Far East in particular and expanding the horizons of Plymouth Argyle. While this agreement has only just been concluded, it demonstrates the considerable appeal that Plymouth Argyle and our region has for companies with a global reach.” I suspect that few outside Plymouth shared this optimism.

Japanese involvement increased when Yasuhiko Okudera was appointed Argyle’s President (7), and there was talk of Japanese players coming to Home Park (8).

By the summer of 2008 things were beginning to crumble; the transfer budget was reported as overspent (9). By March 2009 non-playing jobs were at risk (10).

By the summer of that year there was talk of not only further investment from Japan but also of a takeover (11). Phill Gill sold his shares to Kagami (12), and by July Kagami held 38% of the shares, and his colleagues Sir Roy Gardner and Keith Todd joined the board with holdings of 13%, the trio thus holding a small majority. The appearance of Gardner in particular, a former Chairman of Manchester United, raised hopes for some stabilisation. Paul Stapleton said of Gardner “He’s going to bring a no-nonsense, common sense approach, and a business attitude to everything we do” (13). The challenge was certainly there though – they had, for example, inherited a squad of over 30 players (14).

There was to be no magic wand. In December that year the club was placed under a transfer embargo (15) for what the club dismissed as historic debts, and Kagami rode to the rescue with a loan [sic] of £1.5m (16). Kagami was meantime being sued for £84,000 by former director Gill (17).

2010 opened badly, with the first of a series of winding-up petitions from HMRC (18). In March there was the announcement that the club was to ‘sell off the family silverware’, the only recently acquired Home Park (19). A ‘New World’ was heralded nevertheless (20), involving a 46,000 2018 World Cup stadium – rather than repeat my thoughts on this, see a posting I made at the time called Are we going stark stadium bonkers?. The year’s financial figures, which featured a loss of £2.9m, were described by Gardner, with the kind of understatement that football club Chairmen specialise in, as ‘disappointing‘ (21).

The relegation to League 1 was a bitter pill to swallow given the already worrying state of finances. Gardner however insisted that the new stadium was the way forward: “A new stadium is an essential part of our forward-planning and reflects the scale of ambition at the club” (22). Oh dear, the A-word (ambition). Perhaps the R-word (reality) might have been more appropriate.

The scale of ambition was certainly enormous – last August the board announced plans for a £150m redevelopment of Home Park (23)! The following day, it emerged that the club had not paid their long-serving announcer since late in the previous season (24).

Things have just progressed from bad to worse since then, and I will assume that any reader who reached this point is already familiar with the failed 2018 bid, the further winding-up petitions from HMRC, and the worrying appearance of Peter Ridsdale. I will spare you a repetition of his experiences at Leeds United and at Cardiff City (but seehere if you want to read my previous postings on the Spinmeister). Less well remembered are his days at Barnsley – he took over in October 2003 (25); when he left fourteen months later, new Chairman Gordon Stewart explained Ridsdale’s departure “The club was running into a financial position that was less than comfortable and it was clear cash had to be injected” (26).

For the Spinmeister himself to declare the situation at Plymouth as ‘dire and I can’t even find the words to put into context how bad it is. It is probably worse than you can imagine. This is a race against time‘ (27), one can only assume the situation is considerably worse than dire.

With the exception of bringing in Ridsdale as a ‘saviour’ – all I can offer as hope to the Green Army here is the thought that this might just be a case of fourth time lucky, although I don’t think it actually will be ;-( – the situation at Argyle is one that could have happened at too many clubs – ‘benefactors’ who couldn’t or wouldn’t stay the course, overpaid players, cashflow insufficient to pay all staff on time, a high turnover of managers, a serious case of ‘stadium envy’, a casual attitude to paying HMRC, absentee investors, an absence of fan power… It encapsulates most of what is wrong with English football, and offers a very depressing start to 2011.

I’m guessing that there will be dancing in the corridors at HMRC’s office party this Christmas. They’ve had a good run in the courts over the last month against various football clubs. So far this run has not included a single outcome of the club going into Administration (the last case was Dundee in October; see 1). This might suggest a shift in attitude by football clubs towards HMRC, but I’m not so optimistic. The evidence varies considerably across the clubs involved:

Hull CityHull have been skating on thin financial ice for some time now. As the crunch match against HMRC approached, their bacon was saved by the expediency of new owners, the Allam brothers (2 ). The £1m tax bill they are reported to have paid off needs to be seen in the context of debts of £5m to Barclays Bank and a further £7m in outstanding transfer fees (3). A more recent report has the Allams paying a further £20m on taking over the club officially last week (4). This is all good news for the club’s fans in the short term, with the immediate pressure off the club, but there will have to be drastic changes in the club’s business model if the haemorrhaging of money is to be stopped.

Plymouth ArgyleAs things stand currently, the club has just started a 63-day reprieve from the winding-up petition served by HMRC over a total of £700,000 in unpaid taxes (5). As with Hull, a major change in business model is essential, probably achievable only through new ownership. One piece of good news is that the spinmeister, Peter Ridsdale, is now longer involved in a possible takeover bid (6 and oh so many postings passim). Hopefully the suicidal idea of a World Cup stadium will now finally die a death (see previous posting Are we going stark stadium bonkers?).
The current board has appointed a financial adviser to help them (7), but fans might not feel greatly relieved as his background is at Southampton.
The winding-up petition from HMRC has been adjourned until early February, but, with the prospect of cashflow problems because of the weather (8), things are not looking good.

SheffieldThat’s not as in ‘Wednesday‘ or ‘United‘, but as in ‘Sheffield F.C. The Oldest Football Club In The World Est 1857 Ltd‘ as the company is known, who play in the Northern Premier League First Division South. Trading on their (debatable) heritage hasn’t worked for them, and they were up in court against HMRC last week (9) – petition dismissed as the club had paid up.
The club are planning a new ground (oh dear) and museum (well, maybe). Like Plymouth they had hoped to piggy back 2018WC, but the club has a Plan B which they hope will still go ahead. Time for a less ambitious Plan C perhaps

Sheffield WednesdayMatter here seem to have resolved themselves for the short and even mid term through a takeover and bail out by Milan Mandaric (10), who has cleared the £1.1m tax debt HMRC were pursuing.
The only worry I would have as a Wednesday supporter would be his sense of long-term commitment – this is not his strong point, as fans at St Louis Storm, FC Lika, San Jose Earthquakes, Charleroi, Nice, Portsmouth and Leicester City can attest.

Welling UnitedWelling, who play in , have been facing along term battle to pay off their debts, which had been as high as £90,000, to HMRC (11). The club was back in court again at the beginning of this month (12), and given a further fourteen days to come up with the outstanding £60,000.
The debt has been cleared through a very effective campaign of seeking loans (13). This does not of course clear the debt, and the underlying financial problems are not resolved.

Windsor & EtonUp in court earlier this month, the club was granted a 56-day adjournment (14). Hopes are pinned on negotiating a CVA and a possible new owner.
A disputed figure of £48,000 tax debt has been quoted (15), dating back over five years. Other debts of £87,000 were reported in October (16).
What is likely to happen next remains unclear, but a small bet on the appearance of an Arab billionaire who doesn’t actually exist might be worth a punt. 😉

My records show that historically the incidence of a club going into Administration rises during the season to reach a small peak in November, falls back slightly, but then rises steadily from January to a high in May. Again, perhaps time for a modest wager here. 😉

To round off by returning to the HMRC perspective, during December they were also active pursuing two clubs in Northern Ireland – Newry reached an agreement with HMRC (17), and Glentoran have until mid-January to resolve tax debts reported to be around £300,000 (18).

As we are entering the period of mandatory jollification, I thought a competition might be in order (as my Christmas motto is ‘Bah Humbug’, there will be no prizes though). So the challenge is to suggest the most appropriate song to be played at the HMRC office party for its staff working on football club cases…

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Last Saturday’s football programme was considerably more than decimated (1, and then follow the ‘see also’ too), at least to a language purist. Although the Premier League and Championship programmes were largely maintained, very little football was played lower in the pyramid. The impact of this financially should not be underestimated.

Even though games will postponed rather than cancelled, clubs can expect a reduction in revenues as most games will be moved from a Saturday fixture to a mid-week fixture. This leads to a lower level of attendance by non-season ticket holders and corporate hospitality users, and hence a reduction in revenues.

If the bad weather keeps up, we can expect to see more clubs revealing their financial weakness.

More critically for some clubs is the immediate financial hit on cashflow. Clubs that are living day-to-day financially may well be depending on Saturday’s gate money to settle pressing debts, or at least to keep pressing creditors such as HMRC sweet. Among the clubs I would rate currently as under financial pressure are Plymouth Argyle (1), Sheffield Wednesday (2), Welling United (3), and Windsor & Eton (4). Their situations will hopefully resolve themselves, in varying degrees, with the finalisation of takeovers or the further injection of cash by current owners, but the longer this takes the more critical the postponement of games will be. Any club in a CVA is likely to be on a tight budget too, and hence vulnerable to the volatility of cashflow.

I’ve seen few estimates of how long individual English clubs are likely to suffer (and it’s obviously a function of upcoming weather too), but I did not that Morton, up in Greater Glasgow, is concerned about the possibility of a two-month delay before resuming their published fixtures (5).

If the bad weather keeps up, expect more clubs to reveal their financial fragility.

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Latest development is that the Football League has again declined to return the club share (1). The statement from the club says:

Following a meeting of The Football League Board today, Portsmouth Football Club have been informed that the League are not yet able to approve the transfer of The Football League share to the club.

The League have indicated to the club that there are four further requirements that need to be satisfied.

The club will now take time to consider the feedback from the meeting ahead of further discussions with The Football League.

No indication then of what exactly the ‘four further requirements’ are – bureaucratic detail or major stumbling blocks?

The response from Administrator Andrew Andronikou has been a tad less considered than the club website might suggest if one goes with the report in local newspaper The News (x):

Pompey’s administrator fears the club could go out of business after the Football League refused to allow it out of administration.

Andrew Andronikou said it was now ‘virtually impossible to keep trading as a club’.

And he said it could see potential owner Balram Chainrai walking away from Pompey.

Meanwhile Manager Steve Cotterill preferred the emotive approach, telling BBC Radio Solent: “We need to blow some of these dark clouds away from this club. We’ve had them over us for more than 12 months now. Let somebody else have the spotlight for a while. We’ve been under it perhaps for the wrong reasons, and lots of people want to throw mud at you. When you haven’t got a lot to bat back with, some of that mud will stick.” (x)

All this, especially Andonikou’s dire warnings of the virtual impossibility of continuing to trade, made the next report to emerge from The News strange reading (x). Far from planning the demise of the club, recruitment to strengthen the ‘threadbare squad’ is being planned. On the club website latest news is of ticket sales. Plans are pressing ahead to create a ‘noisy section’ to enhance the Fratton Roar (x).

Whether it’s ‘teetering on the brink’ or ‘business as usual’ is thus far from clear. And before anyone adds a comment, it does of course have to be said that these two have seen little daylight between them for far too long at Fratton Park.

In terms of a necessity for change, time is still on the club’s side in the sense that they can go until the end of the season as they are without suffering further points deduction. The possibility of Balram Chainrai giving up on the club is a far more worrying proposition. On the one hand, he is unlikely to unless he is prepared to write off a large amount of money. On the other, the Football League may be wanting to push him into further commitments he isunwilling to make.

If Andronikou is to be believed, there is no alternative to Chainrai, no John W Henry or Peter Lim about to enter the mêlée – hardly surprising, as Adronikou seems to be saying that the club is still not operating solvently.

One of my correspondents suggests that we may be heading for a repeat of the Leeds United scenario, with a further points deduction for not following Football League rules on clubs entering administration. I certainly have my concerns, but Chainrai is looking to rid himself of the club, unlike Ken Bates, who proved a role model of tenacity-to-retain which must have proved an inspiration to Tom Hicks.

An interesting development has been reported by Accountancy Age: “HMRC has “invited” the administrators of Portsmouth City FC to give their opinion on what “stance” they take on the football creditors rule.” (x) This relates to HMRC’s upcoming court challenge against the Leagues, although Accountancy Age suggests that UHY Hacker Young are unlikely to attend court.

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Coincidentally, the performance of Administrators in general was earlier this week raised by BBC Radio 4’s File on 4, although this was not specifically related to football and I stress that I am not in any way casting aspersions on the conduct of Portsmouth’s.

The programme raised worrying issues however to do with the lack of transparency and the potential for conflicts of interest for insolvency practitioners. If they are, as the programme suggests, poorly regulated, put that together with the poor record of transparent regulation in football, and it makes a heady cocktail. How much longer can the governing bodies just sit back as the likes of Portsmouth and Liverpool unravel so publicly?

Portsmouth Football Club can confirm that agreement in principle has now been reached between the Administrators, prospective new owners and The Football League over the four further requirements that were notified yesterday, and that need to be satisfied before the transfer of The Football League share to the club can be approved.

The necessary additional documentation is now being worked on so that the transfer of The Football League share can take place once these conditions have been fulfilled.

This will then allow the sale of the club by the Administrators to the new owners, at which point Pompey will exit administration.

Portsmouth Football Club would like to thank supporters for their patience, steadfastness and loyalty as the club look to complete this complex process over the coming days.

The battle continues, with two clubs due to face winding-up petitions:

Ilkeston TownIlkeston Town have been wound-up (1) over a tax debt of £50,000. The club had argued that it could make a payment of £20,000 shortly as the result of the sale of a player and offered to clear the outstanding debt at £1,000 per month. The hearing lasted all of two minutes, and Registrar Derrett concluded that “the company is plainly insolvent and I therefore make the final compulsory order“.
Chairman Gary Hodder had been talking to two prospective buyers (2), so all may not be lost.
The club has struggled since the withdrawal of ‘benefactor’ Chet Whyte last year following the collapse of his building empire (3).

Sheffield Wednesday
The day before they were due in court it was reported that they had avoided Administration thanks to the Co-operative Bank (4), and as a result HMRC today agreed to dismiss the petitions (5). Frankly, it’s hard to see why the Bank chose to extend credit even further to the club.
The club had previously managed to extract a 28-day extension on the basis hat a “substantial” amount had been repaid to HMRC, and talks with prospective new owners were “ongoing” (6).
The present situation is that the club has at the last minute managed to “broker a deal with the Co-operative Bank to secure their immediate future“. Specifically, the Bank agreed “to fund a payment of £780,000 to HM Revenue and Customs (HMRC) – the amount sought under the winding-up petition – to buy more time to find a longer-term answer to crippling debts which now total around £30m” (7). Moreover, “The Owls cannot meet current outgoings and one month’s tax bill of around £300,000 is already overdue“. The only rationale upon which the Bank could have continued to support the club is the prospect of new owners.
A number of suitors have been in the frame, including Club 9 Sports (8), former West Ham chairman Eggert Magnusson (9), and a Scandinavian consortium fronted by firmer manager Chris Turner (10).
Who will succeed is of course a vital question on which we must await an answer, but increasingly ‘when’ is becoming the key issue. The club will be lucky to get any further help from the Co-operative Bank, and HMRC are unlikely to hold back should ongoing tax payments fail to be made.

HMRC must be feeling reasonably satisfied with the outcomes. Yet again, today’s proceedings are an indictment of the benefactor model.

The club has been formally expelled from the Conference North (B), meaning that any resurrection club will have to seek a place in the pyramid elsewhere (i.e. lower down) for season 2010/11 at the earliest.

Welling United of the Conference South are the latest club to attract the attentions of HMRC’s legal department. Due in court on 25th August, the winding-up petition is related to a debt of £85,000 (1).

For once the ownership history of the club is very straight forward. Stuart Fuller of The Ball is Round sums it up neatly in the course of an evocative report thus:

The club were actually formed [in 1963] essentially by a Sugar Daddy. Syd Hobbins, ex-Charlton Athletic goalkeeper formed a club for his son’s Graham and Barrie who have gone on to form a true one family dynasty. Barrie Hobbins is still at the club today, fulfilling the role of Kit Manager, Head Groundsman and Club Secretary as well as being a general miserable chap, wandering around the ground as if he had all of the cares in the world.

The club climbed steadily through the Spartan League, the Athenian League and the Southern League, to enjoy over a decade in what is now the Conference National, before slipping down one level in 2000.

In October 2009 manager Andy Ford resigned, saying “I have resigned for a combination of reasons, but primarily because I do not feel that my ambition of achieving a play-off place is achievable within the constraints that are put upon this football club” (2). I’m guessing that Barrie Hobbins must have taken this to heart, as a tax bill of £85,000 does rather suggest the spending constraints had been eased.

With a certain irony, probably unintended, Hobbins suggests that the club’s present predicament is the price to be paid for failing in the play-offs last year. With refreshing honesty he admits “We had a fairly high budget under Andy Ford and we looked at the time in his first season after Christmas that we could be on our way to the play-offs. With that in mind our hearts probably ruled our heads in that we kept the budget the same when we were losing money because we didn’t want to be accused of not wanting to go up or not being ambitious. We were losing money and probably could have shut it off there and then by reducing the budget we had, something we didn’t do. In the last three months of that season we were losing money and didn’t make the play-offs. On top of that we lost our sponsors and the league lost the Setanta money, both of which cost us £15,000 for each. That’s £30,000 we’ve lost straight away and then the recession kicks in” (3). A textbook case for performance-related bonuses rather than higher basic salaries.

£30,000 of the debt has already been paid off (4), and the club hope to pay off a further £15,000 this week (5). The case will then depend on whether the club can put a viable business plan forward to convince the court that the club is sufficiently solvent to keep to any repayment schedule HMRC might agree to. On the plus side, seven players have agreed to take a wages cut (6), but worryingly the club has debts of £150,000 (it’s not clear to me if this includes the HMRC debt) and an overdraft of £15,000.

An alternative strategy would of course be the sale of the club to a new ‘sugar-daddy’. A mystery bidder is apparently in discussions with Hobbins (6), but it all seems very tentative.

One only has to think of other clubs at this level who have been in financial difficulty recently to see why Welling fans should be concerned.

UPDATE – 16 September 2010

Welling have been deducted 5 points by the Football Conference and fined £5,000, the latter thankfully being suspended (A). Barrie Hobbins accepted that Welling had given the Conference income predictions which they could not deliver.

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Surely a sign of the times – three League clubs faced winding-up petitions in the High Court today:

Cardiff CityThe HMRC petition was dismissed – the club has paid the debt of £1.3m (1). Court papers suggest that the club has had to borrow money to pay its summer debts (2).

Sheffield Wednesday
A 28-day extension to the HMRC petition over a debt of£550,000 has been granted (3), the club having already made a “substantial repayment”, but further sums are now due.The attempts to sell the club are ongoing (4).

Southend UnitedAs predicted by Chairman Ron Martin, the debt of £140,000 has been paid to Charterhouse Commercial Finance, and the winding-up petition has therefore been dismissed (5). This follows the paying off of a debt to HMRC for £340,000 just over a week ago which had also been the subject of a winding-up petition (6).These moves have been made possible as a result of what Chairman Ron describes as a partnership with Sainsburys (7).The Southend Echo offers a different take on the relationship with Sainsburys (8). It reveals that court documents indicate that Sainsburys were prepared to lend up to £5m to the club, and that, of this, only £1.8m has not already been borrowed.

For all three clubs then the immediate danger of Administration has been fought off. What is disturbing is that none of the three have managed to pay off their debts from internal resources, such as through the sale of assets. The mileage in a strategy of borrowing from Peter to pay Paul is limited, and none of the three clubs can really breathe freely.

CARDIFF CITY UPDATE – 17 August 2010

The news that Craig Bellamy has joinedthe club on loan (A) has not been met with universal enthusiasm. With reports that Bellamy will be on a wage of £45,000 per week, Motherwell are not surprisingly aggrieved that they are still owed £175,000 for the transfer of Paul Quinn just over a year ago (B), and are considering a winding-up petition against Cardiff. At the time, Motherwell’s finances were far from healthy, in a CVA and with Equifax rating them insolvent (C).

As a Pompey fan, not surprisingly my first reaction to the verdict of Mr Justice Mann was one of relief, a feeling no doubt shared by all Pompey fans, and especially by those members of the club’s non-playing staff for whom the threat of further redundancies will have been eased. Creditors, I would argue, should at least been not displeased with the result, as the real threat of liquidation would have left them with even less.

The judgment was based, of course, on narrow but precise points of law, the full details of which have yet to be published. Matt Slater, who was in court, provides an excellent account of the proceedings on the final day here. He writes of Mr Justice Mann’s pronouncement:

The judgement was an unequivocal ‘Yes’. Mr Justice Mann found that “none of the five heads of attack by HMRC amount to unfair prejudice nor have they been materially affected. In my view, HMRC will not be worse off by the situation left by the CVA bearing in mind what the alternatives could be for the club… There is no worthwhile way of money coming into the club other than by the CVA“ (1). The reasons for his ruling were “This case turned on commercial validity and not the football creditors rule. This is not the right place to decide whether creditors rules are fair or not. There is no way in which any worthwhile solvency can flow into the club other than the CVA” (2).

One way of viewing this is that HMRC’s fight to get the Football Creditors Rule overthrown scored an own goal yesterday. I had argued a few weeks ago (3) that HMRC were making a tactical mistake in pursuing this line, but it gives me little pleasure to see them beaten. The Football Creditors Rule is an absurdity. If I had a pound for every occasion over the last couple of weeks that I’ve been asked to explain it to non-football followers, well, I wouldn’t have been able to make any impact on Pompey’s tax bill, but I could dine out modestly. Invariably the reaction has been one of shock, disgust and almost disbelief. ‘Why should football clubs and players not have to pay their taxes like any other business and its employees?’ is the inevitable question that follows.

The argument the leagues put up, and it is of course their rule, not Portsmouth’s, is that without it the integrity of the transfer market could not be sustained. Without it, it is suggested that the financial collapse of Portsmouth might have brought down Watford. I have to say that I just do not think this argument stands up to scrutiny. It is tantamount to saying that as a club you should be guaranteed payment for a when selling a player whether your customer, the club buying your player, can afford it or not, that the simple expediency of checking credit ratings is not for you. What it allows is an unnaturally high level of transfer fee, and this at the expense of HMRC. Of course normal taxpayers can’t see the sense in this! As for the ‘Watford argument’, I would argue that, had they collapsed as a result of Portsmouth’s collapse, there would have been significant other factors contributing to that collapse.

There is too the issue of image rights, which now have added legitimisation as a means of tax avoidance, i.e. within the law, as opposed to illegal tax evasion. Hardly a good result for HMRC. (Incidentally, an interesting story on image rights here.)

In a nutshell, a good result for Portsmouth, and a bad result for HMRC. Hurray and boo respectively! It was, in the bigger football picture, also a bad result for football. There seems to a creeping myopia that the specificity of sport should somehow place its participants in a special category which avoids paying the taxes which everyone else pays. Sam Allardyce’s call yesterday, “If Cameron is listening, drop the tax bracket will you? Then we can get the best players in the world to play in the best league in the world.” (x) seems to me to be singularly ill-timed and out of step with public opinion.

The leagues are beginning to address the reform agenda, but I fear it is ‘too little, too late’. Given that a consultation process is taking place about the collection of taxes from companies (see Bubbling away in the background), and in the context of the ‘Great Deficit’, the leagues are moving towards their last chance to scrap the Football Creditors Rule before they too face HMRC in court. Let’s hope they have not been buoyed in their intransigence by yesterday’s ruling.